Great read as usual, Sandro. I didn’t know your expertise extended into software!
A couple of points:
1. Valuation: CSU trades at 3.3x P/Sales, or at levels last seen in 2012-13, whereas it’s been as high as 8x in the recent past. You ascribe much of this de-rating to market misconceptions about governance and misplaced fears about AI. However, I would note that ROIC has dropped from the high thirties % to 7% in 2025. I haven’t done the analysis but I would guess this low recent figure is more about below-the-line extraordinary items given that gross margin stayed roughly stable & EBITDA margin rose over the period. Were there write downs, eg of goodwill? Can you hazard an estimate of future ROIC in 3-4 years?
2. Technicals: FWIW, I use LT technicals to time entries and exits. CSU is sitting on horizontal resistance/support last tested in late 2021 and early 2023. It is also at the bottom of a (very tentatively-drawn) channel dating back to 2013. Finally, the weekly RSI failed to confirm the latest dip down, which occurred on somewhat weak volume. I would need to see recovery and confirmation from other preferred indicators before moving ahead on this but I think on balance it will be a lot higher on a 5-year view and I will be looking to buy based on the thesis you set out.
The expertise is expanding a bit 🙂 Substack kind of forces me into it. But these are genuinely high-quality businesses going through a short-term “hated” phase, which is exactly what gets me interested.
I’ll likely have a new write-up on Lumine Group out tomorrow, where I compare its ROIC to Constellation Software. I’ve actually built out ROIC estimates for the years, and that part really blew me away. It’s also encouraging to see I’m not the only one picking up on it. That’s why tomorrow’s post is a very important one.
On the technicals, I can’t really help there. I don’t have any real edge or knowledge in that area.
Great read as usual, Sandro. I didn’t know your expertise extended into software!
A couple of points:
1. Valuation: CSU trades at 3.3x P/Sales, or at levels last seen in 2012-13, whereas it’s been as high as 8x in the recent past. You ascribe much of this de-rating to market misconceptions about governance and misplaced fears about AI. However, I would note that ROIC has dropped from the high thirties % to 7% in 2025. I haven’t done the analysis but I would guess this low recent figure is more about below-the-line extraordinary items given that gross margin stayed roughly stable & EBITDA margin rose over the period. Were there write downs, eg of goodwill? Can you hazard an estimate of future ROIC in 3-4 years?
2. Technicals: FWIW, I use LT technicals to time entries and exits. CSU is sitting on horizontal resistance/support last tested in late 2021 and early 2023. It is also at the bottom of a (very tentatively-drawn) channel dating back to 2013. Finally, the weekly RSI failed to confirm the latest dip down, which occurred on somewhat weak volume. I would need to see recovery and confirmation from other preferred indicators before moving ahead on this but I think on balance it will be a lot higher on a 5-year view and I will be looking to buy based on the thesis you set out.
Thanks!
The expertise is expanding a bit 🙂 Substack kind of forces me into it. But these are genuinely high-quality businesses going through a short-term “hated” phase, which is exactly what gets me interested.
I’ll likely have a new write-up on Lumine Group out tomorrow, where I compare its ROIC to Constellation Software. I’ve actually built out ROIC estimates for the years, and that part really blew me away. It’s also encouraging to see I’m not the only one picking up on it. That’s why tomorrow’s post is a very important one.
On the technicals, I can’t really help there. I don’t have any real edge or knowledge in that area.
Thanks!